KEMAMAN, Malaysia -- Along the coast of northeastern Terengganu state, a steel plant hulks silently over the waters of the South China Sea. On a recent hot afternoon, the sprawling complex is deserted. Its rusting chimneys are smokeless.

"It's been like this for more than a year," sighs a former employee of Perwaja Terengganu Sdn. Bhd. "There is just one shift and the plant comes alive only at night to keep costs...